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One of the big problems with allowing an authoritarian communist/crony-capitalist regime to become a world financial leader is that they lie about everything. China’s long-concealed economic woes finally became impossible to hide, and we got a worldwide market panic that sent the Dow Jones down a record-breaking 1089 points in the early hours, before a rally that was itself partially reversed later in the day.


As bad as things were on Wall Street, the Chinese markets were worse, with even Beijing’s official news agency adopting the “Black Monday” label. A more clever name is suggested by Reuters: “The Great Fall of China.”


“The Shanghai Composite tumbled by 8.5%, its biggest fall since 2007,” reports the BBC. “That plunge wiped out this year’s gains as investors refused to buy into the Chinese government’s repeated attempts to shore up confidence.”


While the BBC says “the smart money is on the central bank reducing interest rates and injecting a semblance of consumer confidence into the markets,” that hasn’t happened yet, and it seems to have rattled everyone who was expecting it to happen. A plan to allow the Chinese state pension fund to invest in stocks “failed to calm traders’ fears, both in China and abroad,” while currency devaluation has European investors worried about their exports becoming less appealing to Chinese consumers.


“The market was in freefall from the open, crashing through the 3500 point barrier – which the central government had previously said would be the market’s “bottom line” of support – without resistance, and erased all year-to-date gains,” writes the Sydney Morning Herald. “Nearly 2000 stocks – about two-thirds of the market – hit the daily maximum 10 per cent fall allowed by the Chinese stock exchange.”


CNN Money’s analysis pictures the current Chinese stock market woes as, in part, fallout from stern actions the government took to deal with a small-investor bubble popping in June. More troubling in the long term are “signs of weakness spreading through China’s manufacturing sector,” and the feedback loop that could result from international investors bracing themselves for a major Chinese economic slowdown.



China deliberately sneezes, everyone else gets the flu.

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